"I have noticed that fuel is at a constant high price now.
What used to be a peak, is now constant.
The high Aussie dollar should make imported fuel cheaper."
MARK COLVIN: New research says that as the global economy improves, Australian drivers can expect local petrol prices to rise. Average petrol prices are now at 152 cents a litre. Data from the Australian Institute of Petroleum and CommSec show prices are at nearly the highest in a year. Demand for oil is being driven by China and other emerging economies.
Here's resources reporter, Sue Lannin.
SUE LANNIN: Prices at the petrol pump are at the highest since April last year according to the Australian Institute of Petroleum. The culprit: the improving but fragile global economy. As demand for oil rises so too does the price.
Economist Savanth Sebastian watches petrol prices for stockbroker, CommSec.
SAVANTH SEBASTIAN: We have seen petrol prices actually surging in the last couple of weeks. The average price has breached through $1.50. It's now holding at the highest level since April 2012.
Really the drivers behind it is the fact that the global economy is healing. We're seeing that investors believe that there's going to be much more demand for oil, and as a result global oil prices have rallied quite sharply.
SUE LANNIN: CommSec estimates that motorists are spending $183 a month on petrol, up $16 since the start of the year. Australian wholesale petrol prices are closely linked to Singapore's benchmark petrol price.
Savanth Sebastian says price rises in Singapore have seen petrol prices here increase by around 13 cents in just over two months.
SAVANTH SEBASTIAN: Unfortunately for domestic motorists it is the overseas factor that are driving fuel prices higher. And we derive a significant proportion of our fuel from the Singapore unleaded price. And that's actually holding just at around the highest levels in about 10 months.
The Singapore price of unleaded petrol (MOPS95 Petrol)) is the key petrol pricing benchmark for Australia.
To meet Australian fuel demand, around 15-20% of petrol is imported (mainly from Singapore). Singapore is the regional refining and distribution centre and among the world’s largest.
If Australia’s petrol prices were below Singapore prices, Australian fuel suppliers would have no commercial incentive to import to Australia (because sales of that fuel would be at a loss here). In addition, Australian refiners would have an incentive to export production.
‘Refiner margins’ margins' are the differences between product prices and crude oil prices, both of which are set by the market, not by oil companies (eg. Singapore petrol ‘refiner margin’ = MOPS95 Petrol price minus the relevant crude oil).
Australian Wholesale Prices
Australian wholesale prices for petrol and diesel (including spot Terminal Gate Prices or TGPs) are closely linked to the Singapore prices of petrol and diesel - not to crude oil prices.
This relationship has been in place for many years. According to public statements, Australian fuel wholesalers use a pricing methodology very similar to that used by the ACCC when wholesale prices were regulated by government. This pricing methodology is called import parity pricing or IPP and it is based on what it would cost to import fuel into Australia.
Recent movements in Singapore petrol prices and Australian TGPs are shown in Figure 1.
The Singapore price of petrol plus shipping costs and Australian taxes represents almost the entire wholesale price of petrol - typically around 95% (as shown in the chart below).
Australian taxes include excise (38 cents per litre) and GST (10%).
